The program will be limited, at least at the beginning, in what is available to borrow. Amazon will initially offer slightly more than 5,000 titles in the library, including more than 100 current and former national bestsellers, such as Stephen R. Covey's "The 7 Habits of Highly Effective People."

None of the six largest publishers in the U.S. is participating. Several senior publishing executives said recently they were concerned that a digital-lending program of the sort contemplated by Amazon would harm future sales of their older titles or damage ties to other book retailers.

Moreover, Amazon will restrict borrowers to one title at a time, one per month. Borrowers can keep a book for as long as they like, but when they borrow a new title, the previously borrowed book automatically disappears from their device.

OK, so this is Amazon's new "Book-a-Month Club" and there are limits. Still, it still adds significant value to owning a Kindle -- the free books are only available on Amazon's hardware -- and will give many customers a world of new and interesting things to read.

This is a major escalation of the battle between Amazon, probably the underdog, and Apple for control of digital media distribution. I was working on a post on that topic when this news hit, so I will rethink a bit and post something soon that examines this competition.

The action, plus aggressive pricing on Kindle hardware, shows that Amazon takes the Apple challenge very seriously, as it should. Wonder how Apple will respond -- or whether it will?